HOUSINGNEWS REPORT
AN ATTORNEY’S GUIDE TO REAL ESTATE INVESTING
Why Real Estate is a Great Investment
In a REIT, a corporation acquires a group of income-generating properties that it holds and manages. These properties may include medical buildings, office buildings, malls, or other high-capacity rental properties. The money raised from the certificate sales is used to finance the purchase of additional revenue-producing properties to be held by the trust. The revenue generated from mortgages or rents on the REIT’s properties is distributed to the certificate holders on a regular basis and is a good strategy for real estate investors that want a steady rental income without the hassles of being intimately involved in the buying and management of physical properties. Real Estate Mutual Funds Real estate mutual funds invest in REITs and other real estate-related
companies. Investing in real estate mutual funds allows individual investors to dabble in real estate without risking much capital. Mutual funds invest in a diversified group of real estate assets, therefore reducing risk and exposure to the investor. By using this approach, they allow individuals to participate in a broader range of real estate investments than provided by REITs. With real estate mutual funds, novice investors can get involved in real estate after making an educated and informed decision. Mutual funds have a wealth of analytics and other data that can provide investors with all the tools they need to diversify their investment into those sectors of the industry that makes the most sense for their investment goals.
Real estate has proven to be a great wealth-generating tool over the past several decades. Even after factoring in the housing crisis of 2008, private commercial real estate investing returned 8.4 percent annually over the decade of 2000 to 2010. Real estate investing is also a great way to diversify a portfolio of stocks and bonds. Historically, real estate has low volatility compared to the stock market. While stocks can lose nearly all of their value, it is improbable the same will occur with physical real estate that you own. Most people are invested in the stock market in one way or another, be it through work retirement programs or private investment. With real estate, an investor can hedge against a market downside by owning tangible assets, with low risk of severe devaluation. Real estate has a negative correlation to the stock market. Meaning that when the stock market drops, real estate-related investment products are usually up. Although the Great Recession was somewhat of an anomaly, residential real estate prices continued to rise after 14 of the last 15 recessions. Inflation Hedge During expanding economic conditions like we are experiencing now, demand for housing rises. When demand rises, rents and values rise along with it. In this respect, the correlation between GDP growth and real estate passes Diversification of Your Asset Portfolio
“Most real estate investing offers the power of leverage. Other investments, such as stocks or bonds, require the investor to pay the full value of the investment, whereas, with real estate, a buyer can leverage his or her credit and assets to finance their investment strategy.”
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JULY 2018 | ATTOM DATA SOLUTIONS
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